More than 200,000 victims of the collapse of Equitable Life may miss out on compensation payments because of failings in a Government scheme, a scathing report by a Westminster spending watchdog has warned.

The House of Commons Public Accounts Committee accused the Treasury of adopting an "arbitrary" target of March 2014 to close the compensation scheme, and urged it to take urgent action to track down as many former policyholders of the failed insurer as possible before the deadline passes.

After a decade-long battle by Equitable savers, the Treasury announced shortly after the coalition Government took office in 2010 that it would compensate up to 1.5 million policyholders. Chancellor George Osborne capped total payments at £1.5 billion in his spending review later that year.

But Friday's report found that the Government "failed to learn the lessons" from previous schemes, such as those for former miners and Icelandic trawlermen.

The Treasury focused on an arbitrary deadline of June 2011 for making the first payments, at the expense of planning properly for how the scheme would be administered, said the report. A "lack of good planning" led to "unacceptable delays" in payments, with only £168 million paid out by March 2012, rather than the expected £500 million.

By the end of March this year, some £577 million had been paid out to 407,000 policyholders, with a further 664,200 payments totalling £370 million due to be made by the time the scheme winds up in March 2014.

But the Treasury estimates that it may not be able to trace some 17%-20% of policyholders - between 200,000 and 236,000 people eligible for payments - by that date. And ministers are not planning to publicise the closure of the scheme until September, which provides little time for applications to be submitted by these savers, many of whom are elderly.

Urging ministers, and the Government agency National Savings & Investment (NS&I) which operates the scheme, to bring forward the publicity campaign, the cross-party committee said it was "concerned" that some policyholders will miss out.

A Treasury source said: "While Labour did absolutely nothing about the Equitable Life scandal for a decade, this Government has allocated up to £1.5 billion to help people who suffered a great injustice, with tens of thousands of policy holders receiving around £700 million in payments since 2011. We make no apology for starting to get payments out the door a year after the Coalition was formed.

"We do not agree that the Government has failed to get a grip on the planning or delivery of this important work. We continue to monitor the progress of the Equitable Life Payment Scheme very closely and are working hard to maximise the numbers of people who will eventually receive payments."